Finding Savings by Re-organizing Your Existing Spaces

Published on Tuesday, 7 January 2014 09:25:02
Written by Marc

Those managing real estate leases are often challenged to find savings and if like most companies you have already tapped into the low hanging fruit ideas to generate savings, you probably find that it takes a good deal of creativity to find new ways to save money. However, some savings can sometimes be found by simply reorganizing your existing spaces. I touched briefly on this during a previous post, 10 Ideas for Saving Money: Part II under bonus tip #11, but I wanted to expand a little on the subject because I believe there are good potential savings here and this is probably an area that few companies tap into for a few reasons.

In my past post, I briefly wrote about the idea that some savings can come from minimizing the size of space you take by looking at all your sites and finding which ones could use less space. However, for most companies, moving from an existing site to another smaller one is not a possible solution. In many cases, it may not even generate any savings simply because the cost of moving from one space to another could wipe out any potential saving generated by leasing a smaller space. We need to remember that moving is often fairly expensive so unless you can justify the cost of moving by finding a better (cheaper) lease, chances are there are no net savings in simply moving from one site to another.

One method to generate savings; however, is by reorganizing your existing spaces. Many people do not think about this, because in reality, when you lease a space for a few years, regardless of the amount of space you really need to operate, you end up using all the space available. Empty areas seem to fill in naturally over time. People bring in all kind of things in the spaces and after a few years, these things seem to be part of the furniture. In addition, it is human nature for all of us to spread out and use all the space available. If you take a typical office space that has been leased by the same company for a few year and start to look at the layout, chances are you can notice that there are many things lying here and there which seem to have been there for a long time.

This is natural; people bring in shelves for temporary storage and leave them in place afterwards. Boxes start to pile up in corners; old printers are left in corridors. There are many items you can easily find when walking into a typical office that has been lease for a few years. In addition, over the years, employees come and go and so do small projects to accommodate them. In some cases, an employee needed a modification to his desk. In other, it was an employee needed something changed in her office. Ten years down the road and the office layout that existed when the company initially took the lease no longer looks the same. Furniture has been replaced by others of different sizes and shapes. Printers that once sat on every desk were replaced by powerful centralized printers. There are possibly dozens of small changes that happen to every lease space each year and after a few years, they add up. In addition, this applies not only to office space, but for just about any type of leased space as well.

Whenever I visit manufacturing or office spaces, I try to walk the site and think about how we would set up the space if we were moving into it right now. What if the office was empty and we were bringing in the groups of people that are currently working there. Would we encourage them to bring tons of storage boxes and old printers? No, of course not.

Example: An Office Space

When we plan our needs for a new office space, we normally seek as much information as we can about the needs of the people that will occupy the new space. We gather the number of open and closed offices, the number and size of meeting rooms and then list all the other items we need to include (lobby, coffee area, storage space, and so on). Then with a space planner or designer we layout the furniture on paper, get confirmation from the groups which will be working there and start to move them.

This is an over simplification of the process, but the idea is to say that we plan for the needs of the employees while trying to optimize the leased space. Same thing goes when leasing a manufacturing site. Operations staff normally does a great job planning where each of the production equipment will go and what the final layout should look like. In office spaces as in other types of spaces, we can normally agree that people do a good job in planning for the needs and optimizing the layouts.

Over the Years: Things Seem to Get Out of Hand

For this reason, it makes sense to walk the sites (or spaces) with a fresh eye and position yourself as if you were moving into the site for the first time. Chance are you will notice many items that do not belong in the site, areas of wasted space, portion of office layouts that are far from being optimized anymore.

How to Start

If you manage a number of spaces, which have similar characteristics, such as, office spaces you could start by comparing your sites on a leased area per employee basis, this is simply done by taking the total size of the space you lease and dividing the number by the total number of people working there. For example, if you have a leased office that is 12,000 square feet and there are 70 people working there, your ratio is 12,000 divided by 70, which gives about 171 square feet per person. If you do this for all your office sites, you can start to identify those which have a higher than normal ratio.

Obviously, the lower the ratio means you use less space per employee, which is generally a good thing from a cost perspective. While ratios can vary a lot, I often tried to use a ratio of 175 square feet per person as a standard. However, this number can be high for offices with lots of cubicles and the number might be low for a head office that can be heavy on closed offices. At times, I have seen offices with ratios as low as 130 and be very comfortable and at other times, I saw head offices with ratios around 240, which still seemed cramped for space. Go figure.

Once you identified potential sites you want to look at, go and walk them, see the sites with your own eyes (or use the eyes of a good space planner or designer) and see if you could reduce the space you occupy.

I have always been amazed at the number of sites, which over the years grew in size because people needed, or simply took more space because they were thinking they needed more space, without doing any detailed analysis of the situation. For various reason people can make requests to lease a little more space each few years. Reasons most often seem to be logical on the surface, "we are growing," "we are adding more people," "we expect to hire more very soon," "we are getting a new client so we need more space," "we are getting cramped in our current space so we need more."

Whatever the mentioned reasons, if you manage the real estate leases and a request to lease more spaces comes from a business unit, you might question the request but often you comply and simply lease more space. If you can take the opportunity before you lease more space to walk to site in question, you might be surprised by what simple tours can find. In many cases, I found that it is possible to avoid leasing more space by simply rearranging the existing one and getting rid of items that people do not need to keep on the floor.

Remember, its expensive to lease real estate, does it really make sense to pay high rent to store boxes of old receipts you may never need again? Worse case has these items put in storage (where spaces cost less to lease). The process of reorganizing your existing spaces may not always be an easy one, but it may be worth it if you can either avoid taking more space or even give back some of the existing space you lease (give back or sublease depending on the situation).

I remember an office that had a very high ratio of space per employee, simply because people had taken an office, which was a sublease and did not bother to make any renovation to optimize the site initially. Considering that it was a sublease and the rent was cheap at the time, they decided to take it as is and simply move the people in. Many employees, which normally would have had a small cubicle, were given a large closed office simply because these offices were available. When the sublease term ended, the company decided to enter into a head lease with the landlord and never proceeded to do a renovation to optimize the space. A few years later that company was acquired by another one and things remained the same.

Until we decided to look at the office space, look at the ratios of space per employee then and question the needs of the employees. Following a reorganization project that we did, we managed to reduce the size of the office by almost forty percent (yes 40%). Of course, it took a management decision to move numerous employees from closed offices into cubicles but these employees would not, under company policy (and under normal circumstances), have had a closed office in the beginning. We also saved a ton of space by moving into storage many boxes and shelves that did not need to be located within the office space. We managed to sublease a portion of the freed up space and negotiated to give back to the landlord another portion of the freed up space. In the end, it provided a substantial saving for the company.